Oil industry cries out over unilateral cut in fuel prices

• Estimates losses of around Rs105bn for refineries and marketing companies• Several OMCs warn of possible bankruptcy amid already shrinking foreign participation in sector• OCAC warns continued policy instability could trigger investor withdrawal and threaten long-term market viability

ISLAMABAD: The country’s oil industry has protested against a record 18–20 per cent cut in petroleum prices announced by the prime minister last week, alleging the decision as unilateral, inconsistent with established processes, and resulting in an estimated Rs105 billion loss to oil refineries and oil marketing companies (OMCs).

An industry executive said the federal cabinet had approved the pricing mechanism four times in less than three months, and each time the “goalposts were changed” to the industry’s disadvantage during extremely challenging conditions.

He warned that several OMCs could face bankruptcy, adding that the country was already short of A-class companies following the exit of Shell, Total, and Chevron.

He said the government first used a 15-day average when prices were rising, then switched to a weekly average as prices, import premiums, and war risk surcharges surged, and later moved to crude-based pricing instead of product imports.

In the latest decision, he said, the government used average premiums of three months, while the actual benchmark of Pakistan State Oil (PSO) was not available. This was despite petroleum imports being reviewed and approved by the National Coordination and Management Council (NCMC), a newly created civil-military forum on energy supplies and pricing.

Giving an example, he said the ex-refinery price for diesel should have dropped by Rs30 per litre on June 19 under the prevailing formula but was reduced by Rs81 per litre under a cabinet decision taken through circulation, without any debate or discussion.

He added that PSO alone was expected to suffer........

© Dawn Business